Wednesday, December 12, 2007

S Kalyana Ramanathan / Chennai December 13, 2007To invest $178 million in setting up sales and service outlets.

In a little over a year, Mahindra & Mahindra’s (M&M’s) all-Indian utility vehicle, Scorpio, will enter the quality-conscious US market, which is also the largest in the world with 15 million vehicles in annual sales.

The company already has firm orders for 45,000 units of Scorpio for the first year, which is more than the 40,000 it sold in India in the last financial year.

More importantly, 285 US dealers have signed up to sell the vehicle and are investing $178 million in setting up sales and service outlets.

Mahindra & Mahindra had spent $120 million on developing the Scorpio platform five years ago, and there are 140 Scorpio dealers.

The enthusiastic response to the vehicle in the US comes amid a clamour of protest by US dealers against selling Jaguar to an Indian company for the fear that it would erode the image and sustainability of the brand.

“The timing of M&M’s entry into the US is perfect. With the price of the fuel going up, Americans want to buy SUVs and trucks that are not too costly to operate,” John Perez, the chief executive of Alpharetta, Georgia-based Global Vehicles, which will be handling Scorpio sales in the US, told Business Standard over the phone.

Starting March 2009, three diesel variants of Scorpio will be sold in the US. “We already have 45,000 bookings for the first year. All of them are backed by letters of credit,” said Perez, adding that Scorpio would not be priced cheap. He hinted at a tag of $25,000.

Pawan Goenka, the president of the automotive division of M&M, said he was not surprised by the demand for Scorpio in the US, though he conceded that it had exceeded the company’s target.

The current annual capacity of 52,000 units of Scorpio in India will have to be expanded to meet the US demand.

“It could either be in Nasik or Chakan (near Pune). We have not decided that,” he said, adding that the company would spend $50 million on upgrading the vehicle to meet the US National Highway Traffic Safety Administration requirement.